These requests are quite common for business owners, and it is important to understand the meaning of Evidence of Insurance and Certificate of Insurance. What is the real reason why a landlord and/or finance company wants a copy?
[callout template=”default”]When working with your insurance agent, be proactive and obtain all the required info so that they can help provide the necessary proof of coverage.[/callout]
Oftentimes, business owners forget to include Additional Insureds and Loss Payees in the information they provide to their insurance agents. Some salon owners know that they need proof of insurance in order for their landlord to release the keys, but don’t fully understand the concept of an Additional Insured. When signing a lease, you (or your entity) gain insurable interest in the building. Some leasing companies charge fees if you do not provide adequate proof of insurance, which can add up quickly! These companies are not trying to take advantage of you; rather, they are trying to protect themselves in the event there is a loss to their assets, which you are leasing. By providing prompt and proper proof of insurance, you shouldn’t have any issues with late fees. In order for your insurance agent to provide you the best service, provide them as much detail as possible.
These are some of the items your insurance agent will need:
Company Name
Provide them the full name of the Landlord, Property Manager, Finance Company and/or company requesting proof of coverage.
Mailing Address
Provide the mailing address where the proof of insurance must be sent (not necessarily where you pay your bill).
Email Address
If you provide an email address, proof of insurance can be emailed to expedite the process (although you still need to provide the mailing address).
Changes to the Business
Provide them with info about any changes, such as new equipment, increasing property limits or a new location.
Here is an example of why landlords want to be added to their tenants’ insurance policies:
Accidents happen, but when it happens at your salon it could result in a lawsuit. Not only could the salon be sued, but the person suing the business would most likely come after the landlord, as well. By adding the landlord as an Additional Insured, they too are covered for legal defense under the salon’s policy in the event of a lawsuit. That being said, it is very important that your legal team reviews your lease prior to signature. In our litigious society, landlords can make very strict requests of their tenants, which are nearly impossible to abide by. Key words that should alert you are Waiver of Subrogation, Primary and Noncontributory language, high Umbrella limits, and Earthquake Coverage. Other stipulations built into leases make compliance difficult for your insurance carrier and often put you in a position of accepting more liability.
Besides requests for Additional Insured status, your business affiliates may request to be added as a Loss Payee onto your policy. This is very different from an Additional Insured on a policy, because the claims check for specified damages would be made out to that party. For example, if you financed some new equipment, the finance company would probably ask you to list them as a Loss Payee. That way, if the equipment was damaged and the cause was covered by your policy, the leasing company’s collateral is protected. Remember, when you add a Loss Payee on an insurance policy, you are giving the insurance company permission to pay the value directly to the listed company. This ensures that your loan is paid back, even if you no longer have the equipment.
Listing additional names on your policy, whether an Additional Insured or a Loss Payee, opens up your policy to others. It is important to know the significance of these actions, so we recommend that you review the requested requirements before signing any lease. When working with your insurance agent, be proactive and obtain all the required info so that they can help provide the necessary proof of coverage.
